Canada’s Innovation Paradox – Strong Start, Missing Impact

Global Innovation Report | Oct 28, 2024

Image: Global Innovation Index 2024 (Canada)

Canada Has Strong Innovation Inputs But Falls Short When Scaling for Global Impact

The World Intellectual Property Organization’s (WIPO) recently published it's annual 2024 Global Innovation Index (GII) (download 17 page PDF report). The WIPO Global Innovation Index ranks countries is based on numerous metrics that are divided into inputs and outputs.  There is lots of data to sift through and a great resource to benchmark innovation year over year by peer clusters and in total 133 countries.

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Inputs measure a country's innovation capacity and infrastructure while outputs measure more quantifiable results like patents, high tech exports, and knowledge creation. In 2024, strong innovation nations like the U.S. and UK have strong industry-academia partnerships, high R&D spending in the private sector, and enviable systems for transforming research into global technology exports.  See the Global innovation tracker

Top 10 Global Innovation Countries

• 1. Switzerland
• 2. Sweden
• 3. United States of America
• 4. Singapore
• 5. United Kingdom
• 6. Republic of Korea
• 7. Finland
• 8. Netherlands (Kingdom of the)
• 9. Germany
• 10. Denmark

Comparative Table of Key Innovation Metrics

The table below shows key innovation metrics across a few countries selected just for quick comparison:

How did Canada Rank on Innovation in 2024?

Canada holds the 14th spot among 133 countries.  (also see Canada's last year 2023 GII ranking)

Canada's innovation approach shows solid support for startups in their early stages but the research suggests that Canada could further strengthen its innovation outcomes by adopting policies that help companies continue to grow as they scale, and encouraging more companies to develop and retain domestic intellectual property (IP) strategies.  See Canada's economic profile

Known for its research institutions, availability of early stage capital, and stable regulatory environment, Canada ranks high in innovation inputs but when it comes to translating these strengths into competitive products, patents, and high technology exports, Canada lags behind pointing to a key gap in its innovation approach and pipeline.

1. Top Rank for Early-Stage Venture Capital but Challenges with Scaling

• Canada: 1st in venture capital availability | Peers: U.S. (17th)
• Insight: According to the WIPO ranking and to our surprise, Canada ranks number 1 in early-stage venture capital.  That's great news for startups.  That is there are plenty of funding options to consider from angels to investment crowdfunding and government support including incubators all help many businesses secure initial funding. However when it comes to later stage funding, there's a noticeable gap.  The U.S. has a much larger market and range of resources for scaling companies up making it an attractive place to grow domestically.  In contrast, Canadian companies often have to look elsewhere for additional scale-up funding and expansion markets and opportunities.

See:  Finance Canada Publishes the Canada Innovation Corporation Blueprint for $2.6 Billion Over 4 Years

• ➤ If Canada can expand support for later stage financing it would help incentivize more startups to scale here in Canada without relocating overseas.  We need specialized funds for expansion along with encouraging private corporations and investors to participate in later-stage funding.

2.  High Innovation Inputs but Disproportionately Lower Outputs

• Canada: 8 in innovation inputs, 20 in outputs | Peers: U.S. (Inputs 4, Outputs 5), UK (Inputs 10, Outputs 3)
• Canada’s strong input resources like research institutions, venture capital, and stable regulations are not translating into proportionate innovation outputs. Comparably, the U.S. and UK have systems in place to bridge this gap by supporting IP commercialization and high tech manufacturing. This points to a gap in Canada’s in converting inputs to measurable outputs.  Canada seems to have a lower 'Knowledge and Tech outputs' ranking than expected, and ranks 102nd in labor productivity growth.
• ➤ Focus on commercialization to convert high research spending into economic impact. Canada could enhance industry partnerships and align research with market demands, as seen in Switzerland and the U.S. where inputs are directly targeted at high value patents, tech exports, and innovative goods​.
• ➤ Mission Driven Research Programs - Canada could learn from successful programs like the European Union’s Horizon Europe, which connects academic research to industry objectives (i.e., clean energy, advanced manufacturing, or health sciences).  Canada can make it easier for universities and companies to work together by creating solutions that are ready for patents and commercialization.
• ➤ Industry-University Research Centers - Canada could learn from Industry-University Cooperative Research Centers in the U.S. that have companies fund projects that align closely with commercial goals to ensure research is practical and achieves economic outcomes and patent development.  This approach brings research beyond academic papers and closer to market applications and demand.

3. Untapped Intellectual Property and Low High Tech Exports

• Canada: 31st in patents per billion GDP, 37th in high tech exports | Peers: U.S. (8th in patents, 20th in high tech exports), UK (25th in high tech exports), Switzerland (10th in high tech exports)
• Canada's intellectual property and high tech exports show that homegrown innovations aren't being fully utilized. Unlike Switzerland and the UK who have policies and incentives that help keep and develop IP within their borders, Canada’s lack of similar measures means fewer local innovations reach commercial success. This untapped potential of IP limits Canada’s ability to turn research into marketable products and economic output.

See:  IP Box: Would a special IP income tax rate boost Canada’s flagging innovation?

• ➤ Canada could adopt IP retention policies, such as a “patent box,” which provides tax incentives for patents held and developed domestically. These policies could help increase IP outputs, making it more feasible for companies to develop and commercialize new technologies without needing to shift operations abroad​​

Strategic Focus for Canada

Canada’s need to bridge the gap between research and commercialization. Countries like Switzerland and the U.S. are top innovators because they don’t just fund research but they make it easier to turn research into real world products and applications. Below are a few strategies to help fill the gap and better align what's being researched and what industries and markets actually need.

• Encourage more companies (public and private) to invest more in R&D which will help align research efforts making commercialization more efficient and feasible.  Having companies invest in this way derisks their own investments.
• Offering tax breaks for patents held in Canada to strengthen domestic IP which would give Canada a stronger position in exporting high tech globally.
• Build stronger connections between industry and universities to better align research and commercialization.

See:  Analysis of Centrality in Canada’s Innovation Entrepreneurship System

Conclusion

​By focusing on these strategies, Canada can better support its startups and create an ecosystem where new ideas grow into global successes. Closing these gaps will be key to Canada strengthening its position as a leading innovator worldwide.

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